PAS 8: ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS

BLANK is a change due to a misstatement or omission committed in prior years it is a correction of a previously recognized transaction

Retrospective restatement

International Financial Reporting Standards (IFRSs)

are Standards and Interpretations issued by the International Accounting Standards Board (IASB).

Accounting estimates

are monetary amounts in financial statements that are subject to measurement uncertainty.

Prior period errors

are omissions from, and misstatements in, the entity's financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information.

Accounting policies

are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.

What are included in the term IFRS

1. IFRS international financial reporting standards 2. IAS international accounting standards 3. IFRIC international financial reporting interpretation committee interpretations 4. SIC standards interpretation committee interpretations

Sources/ Where should the management refer their judgement if there is no IFRS

1. Recent pronouncements of other standard-setting bodies 2. Conceptual framework 3. The requirements in IFRS dealing with similar and related issues

title of PAS 8

Accounting Policies, Changes in Accounting Estimates and Errors

Impracticable

Applying a requirement is BLANK when the entity cannot apply it after making every reasonable effort to do so.

Disclosures concerning prior period error N A of C A of C at the beginning of the EPP ü If retrospective restatement is impracticable, the circumstances which led you to conclude that it is indeed impracticable and a description of how and from when the error has been corrected

Disclosures concerning prior period error ü The nature of the prior period error ü For each prior presented the amount of Corrections ü The amount of correction at the beginning of the earliest prior period resented ü If retrospective restatement is impracticable, the circumstances which led you to conclude that it is indeed impracticable and a description of how and from when the error has been corrected

T or F PRIOR PERIOD ERROR ü Such errors do not include the effects of mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretation of facts, and fraud

F

T or F Prospective restatement ü Recognising the effect of the change in the accounting estimate in the current and future periods affected by the change. The change is applied to the transactions from the date of change of estimate

F

T or F, Guidance that is an integral part of the IFRSs is not mandatory

F

T or F, If an IFRS requires or permits such categorisation, an appropriate accounting policy shall be selected and applied inconsistently to each category

F

What does IFRS comprise of

IFRS, IAS, IFRIC interpretations, SIC Interpretations

When can the accounting policies be changed

If it is required by an IFRS and if it results in the financial statements providing reliable and more relevant information

What should management use in the absence of an IFRS that specifically applies to a transaction, other event or condition, in developing and applying an accounting policy

Judgement

BLANK involves a change due to an application of a standard. There were neither mistakes nor omissions. The changes applied only to present a financial statement as if it originally has implemented the new policy

Retrospective application

T or F Changes in accounting estimates ü It is an adjustment of the carrying amount of an asset or a liability it is a change in the carrying amount because of new discoveries or developments that better improves the estimate which as a result makes it closer to their actual value

T

T or F Disclosures concerning prior period error ü The nature of the prior period error ü For each prior presented the amount of Corrections ü The amount of correction at the beginning of the earliest prior period resented ü If retrospective restatement is impracticable, the circumstances which led you to conclude that it is indeed impracticable and a description of how and from when the error has been corrected

T

T or F PRIOR PERIOD ERROR ü A prior period error is corrected if it is material to the entity and the information is material if omitting or misstating it could influence decisions that the primary users of financial statements make on the basis of the report.

T

T or F PRIOR PERIOD ERROR ü Omissions from and misstatements in the entities financial statements for one or more prior periods arising from a failure to use or misuse of reliable information

T

T or F ü IAS 1 requires the reporting entity to present at minimum two statement financial positions two statement of comprehensive income two statement of changes in owners equity two statement of cash flows and related notes

T

T or F ü If there is a change in accounting policy the entity must present a third statement of financial position dated at the beginning of the earliest period presented

T

T or F ü There is no need to change all the financial statements individually you only have to change the statement of financial position of the earliest period presented

T

T or F, A change in the measurement basis applied is a change in an accounting policy, and is not a change in an accounting estimate

T

T or F, An entity can do categorization if IFRS specifically requires or permits categorisation of items for which different policies may be appropriate

T

T or F, An entity shall select and apply its accounting policies consistently for similar transactions, other events and conditions

T

T or F, Guidance that is not an integral part of the IFRSs does not contain requirements for financial statements

T

T or F, IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets is a change in an accounting policy to be dealt with as a revaluation in accordance with IAS 16 or IAS 38, rather than in accordance with this Standard

T

T or F, IFRSs are accompanied by guidance

T

T or F, IFRSs set out accounting policies that the IASB has concluded result in financial statements containing relevant and reliable information about the transactions, other events and conditions to which they apply. Those policies need not be applied when the effect of applying them is immaterial

T

T or F, The effects on an accounting estimate of a change in an input or a change in a measurement technique are changes in accounting estimates unless they result from the correction of prior period errors

T

T or F, The initial application of a policy to revalue assets in accordance with IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets is a change in an accounting policy

T

T or F, Users of financial statements need to be able to compare the financial statements of an entity over time to identify trends in its financial position, financial performance and cash flows

T

T or F, When it is difficult to distinguish a change in an accounting policy from a change in an accounting estimate, the change is treated as a change in an accounting estimate

T

T or F, When it is impracticable to determine the period-specific effects, the entity shall apply the new accounting policy to the carrying amounts of assets and liabilities as at the beginning of the earliest period for which retrospective application is practicable

T

T or F, the same accounting policies are applied within each period and from one period to the next unless a change in accounting policy meets one of the criteria in paragraph 14

T

T or F, The use of reasonable estimates is an essential part of the preparation of financial statements and does not undermine their reliability

T The use of reasonable estimates is an essential part of the preparation of financial statements and does not undermine their reliability

Material

The information is relevant in a sense that it can influence the decisions of the primary users

Should IFRS be applied to the accounting policies if IFRS specifically applies to a transaction, other event or condition?

Yes. When an IFRS specifically applies to a transaction, other event or condition, the accounting policy or policies applied to that item shall be determined by applying the IFRS.

To the extent that a change in an accounting estimate gives rise to changes in assets and liabilities, or relates to an item of equity, it shall be recognised by (BLANK)

adjusting the carrying amount of the related asset, liability or equity item in the period of the change.

Prospective application

applying the new accounting policy to transactions, other events and conditions occurring after the date as at which the policy is changed; and recognising the effect of the change in the accounting estimate in the current and future periods affected by the change.

An entity may need to change an accounting estimate if changes occur in the (BLANK) or as a result of new information, new developments or more experience

circumstances on which the accounting estimate was based

What are not considered changes in accounting policies

differ in substance, did not occur previously, immaterial

What are included in the prior period errors

effects of mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretations of facts, and fraud.

Prospective recognition of the effect of a change in an accounting estimate means that the change is applied to transactions, other events and conditions (BLANK)

from the date of that change.

A change in accounting policy shall be applied retrospectively except to the extent that it is (BLANK)

impracticable to determine either the period-specific effects or the cumulative effect of the change

Retrospective application

is applying a new accounting policy to transactions, other events and conditions as if that policy had always been applied.

Retrospective restatement

is correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior period error had never occurred.

An entity uses (BLANK) to develop an accounting estimate. Measurement techniques include estimation techniques (for example, techniques used to measure a loss allowance for expected credit losses applying IFRS 9) and valuation techniques (for example, techniques used to measure the fair value of an asset or liability applying IFRS 13)

measurement techniques and inputs

Other source for management's judgement

most recent pronouncements of other standard - setting bodies

Disclosures ü An entity shall disclose the BLANK of a change in accounting estimate that has an effect in the current period or is expected to have an effect in future periods except for the disclosure defect in future periods because it is impracticable to estimate that effect

nature and amount

objective of PAS 8

prescribe the criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors.

By its nature, a change in an accounting estimate does not relate to (BLANK)

prior periods and is not the correction of an error.

When it is impracticable to determine the cumulative effect, at the beginning of the current period, of applying a new accounting policy to all prior periods, the entity shall adjust the comparative information to apply the new accounting policy (BLANK) from the earliest date practicable

prospectively

The effect of a change in an accounting estimate, other than a change to which paragraph 37 applies, shall be recognized (BLANK)

prospectively in the profit or loss

Scope or Where shall PAS 8 be applied

selecting and applying accounting policies, and accounting for changes in accounting policies, changes in accounting estimates and corrections of prior period errors.

How should the change in accounting policy be applied - this is applicable when change is required by an IFRS and such IFRS contains a transitional provision

ü Applied in accordance with the transitional provisions of the standard

How should the change in accounting policy be applied - when it is impracticable to apply the change retrospectively

ü Applied prospectively from the earliest period practicable

How should the change in accounting policy be applied - this is applicable if the entity change in accounting policy voluntarily or the IFRS does not contain any transitional provisions

ü Applied retrospectively